EMV Chip Cards are Coming to the U.S. (Here's What Merchants Need to Know)

EMV (or “chip-and-pin”) credit and debit cards are now making their way to U.S. consumers.

To encourage merchants to comply with the new standard, all major credit card brands in the U.S. will be instituting a shift in fraud liability. By October of this year, physical retailers who aren’t ready to accept EMV cards may be liable for financial losses as a result of card fraud.

Here’s what you need to know about EMV and becoming compliant with the new standard.

What is EMV?

EMV is a payment card standard created by (and named after) Europay, MasterCard, and Visa that promises to enhance security for physical credit and debit card payments.

As a merchant, employing EMV is a great way to prevent fraudsters from targeting your store. During a transaction, a small computer chip embedded in every EMV card securely communicates with the card issuer to verify and approve the charge. This added layer of security not only keeps customers safe, but businesses too.

Why is this change happening?

Though the U.S. accounts for only 24% of the world’s credit card transactions, it’s responsible for nearly 50% of the world’s credit card fraud. EMV chip cards are being rolled out to improve payment security and make it harder for fraudsters to counterfeit cards.

The introduction of EMV in the U.S. is necessary to combat fraudsters, reduce card fraud losses, and provide a safer shopping experience for American consumers.

How do EMV chip cards work?

Unlike current magnetic-stripe cards that are swiped, EMV chip cards are either inserted into, or tapped against, EMV-compatible card readers. Once an EMV chip card is inserted or tapped, there are three possible ways in which to complete the transaction:

Chip & PIN

These cards require that the cardholder enter a personal identification number (PIN). Since some chip cards being issued in the US will be PIN capable, it’s important that retailers can support this verification method.

Chip & Signature

This method still takes advantage of the enhanced security that EMV offers by preventing cards from being duplicated, but requires the cardholder to verify the transaction with a signature, similar to existing magnetic-stripe cards. This will be the most common form of EMV chip card issued in the early period of the transition.

Tap (Contactless)

Data between chip card and a payment terminal is exchanged wirelessly when the two come into contact. In most cases, the customer will be required to provide no verification for smaller transactions. New forms of mobile payments like Apple Pay will also work this way.